FDIC Head Resigns After Announcing Takeover Attempt by Democrats

Donald Trump’s choice for the Federal Deposit Insurance Corporation, Jelena McWilliams, abruptly resigned Friday, giving Democrats leadership of the agency in the weeks ahead.

The 88-year-old organization that protects billions of dollars in assets at the country’s banks will be led by board member Martin Gruenberg. He will take over as acting head on February 4.

It came after an effort by Gruenberg and other Democrats in the agency’s administration to depose McWilliams, whose tenure was not set to expire until June 2023.

Last month, the FDIC’s board agreed to solicit public input on possible reforms to the agency’s bank merger clearance procedure. McWilliams chose not to vote; the FDIC declared the action invalid.

A majority of the board may vote on things without the chair’s approval, sparking a legal argument, with Democrats claiming obvious power. 

Letter of Resignation

In a Wall Street Journal op-ed, McWilliams later called the event a “hostile takeover.” Her letter of resignation to President Biden on Friday did not refer to the controversy.

 

Her departure means none of the three federal financial agencies would have a Senate-confirmed person in charge of their primary regulatory role.

The president is set to nominate a deputy chair of oversight at the Federal Reserve, but his nominee for Comptroller of the Currency was dropped after moderate Democrats objected.

For now, Gruenberg, who’s been on leave from the FDIC for three years, gets to return. As financial technology companies and innovations shake banking systems, the FDIC must decide how to respond.

McWilliams said the agency is looking into whether some Stablecoins, a form of cryptocurrency tethered to an asset, could be protected by deposit insurance.

Gruenberg is also anticipated to encourage institutions to prepare for climate change risks, an area where the departing chairman has been cautious.

McWilliams refrained from voting on a report by the Financial Stability Oversight Council, a Treasury Department-led body of regulatory leaders, citing a need for additional investigation.

It is unclear whether subsequent FDIC boards will be able to overturn the chairman with a majority vote. 

Before joining the FDIC in 2018, McWilliams worked for Sens. Mike Crapo (R-ID) and Richard Shelby (R-AL), including as head of the Banking Committee. She was Fifth Third Bank’s general counsel officer before being selected to lead the FDIC.

Regarded Highly by Bank Heads

As CEO of JPMorgan Chase, Jamie Dimon regarded her as a consummate professional. His bank, the country’s largest, is generally supervised by other organizations, monitored by the FDIC for deposit protection purposes.

The FDIC’s battle between McWilliams and Democrats has heightened political tensions. According to Sen. Pat Toomey (R-Pa.), the White House backed the FDIC Democrats’ decision to circumvent the GOP chairman.

Toomey said he was profoundly worried by the administration’s backing for the extreme demolition of institutionalism and an unusual attempt to undermine the financial regulators’ credibility and integrity.

President Biden should quickly appoint the appropriate people to replace the two vacant board positions and Interim Director Gruenberg’s seat.

Progressives hailed McWilliams’ departure. The FDIC board may now focus on limiting the dangers of “Too Big to Fail,” according to the Open Markets Institute on Twitter.

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